Worries that the Federal Reserve may end its bond-buying program or even raise its benchmark interest rate helped push the yield of 10-year Treasury notes as high as 2.61 percent this week. In May, it was 1.63 percent. Mortgage rates have followed, with the average 30-year loan rate rising to 4.46 percent from 3.93 percent. It was the biggest one-week increase since 1987. An extra wallop is facing many student-loan borrowers when rates are set to double next week.
The economy is still weak. First-quarter growth in gross domestic product was revised downward to 1.8 percent from 2.5 percent. Many forecasters had expected annualized GDP growth this year of 3 percent. So Fed officials have scrambled to reassure the markets that no sudden moves on interest rates or the bond-buying program are being contemplated. It’s a complicated situation. While no serious inflation is on the horizon — indeed, deflation continues to be a danger — essentially zero rates create losers and winners. Fixed-income investors have often been penalized. The stock market has been powered by Fed hot money all out of proportion with the strength of the economy.
What do you think?
Read on for some of the important stories you might have missed this week and the haiku:
This Week’s Links:
• Emerging markets, hitting a wall | Tyler Cowen/NYT
• The top 0.1 income shares, 1915-2008 (chart) | Miles Kimball
• Why the growth-by-debt status quo is doomed | Zero Hedge
• Ireland falls back into recession despite austerity drive | The Guardian
• What if we’re looking at inequality the wrong way? | NY Times
• What to do with the hypertrophied financial sector | Brad DeLong
• Make banks too small to save | Baseline Scenario
Today’s Econ Haiku:
A bridge to somewhere
Federal money waiting
We jump off the bridge